EMPLOYEE BENEFIT PLANS

In connection with the spin-off of the Performance Fibers business, Rayonier entered into an Employee Matters Agreement with Rayonier Advanced Materials, (see Note 3— Discontinued Operations), which provides that employees of Rayonier Advanced Materials will no longer participate in benefit plans sponsored or maintained by Rayonier. Upon separation, the Rayonier Pension and Postretirement Plans transferred assets and obligations to the Rayonier Advanced Materials Pension and Postretirement Plans resulting in a net decrease in sponsored pension and postretirement plan obligations of $100 million. This was based on a revaluation of plan obligations using a 4.0 percent discount rate versus 4.6 percent at December 31, 2013. In addition, $78 million of other comprehensive losses were transferred to Rayonier Advanced Materials, net of taxes of $45 million.

The Company has one qualified non-contributory defined benefit pension plan covering a portion of its employees and an unfunded plan that provides benefits in excess of amounts allowable under current tax law in the qualified plans. The Company closed enrollment in its pension plans to salaried employees hired after December 31, 2005. Employee benefit plan liabilities are calculated using actuarial estimates and management assumptions. These estimates are based on historical information, along with certain assumptions about future events. Changes in assumptions, as well as changes in actual experience, could cause the estimates to change.

The Company sold its Wood Products business in March 2013. As a result of the sale, all employees covered by the Wood Products defined benefit pension plan are considered terminated employees. Amendments to the plan in June 2013 resulted in all such employees automatically vesting in the plan. Additionally, a one-time lump sum distribution was offered to terminated Wood Products plan participants or their beneficiaries. Based upon acceptance of that offer by certain participants, $3.0 million was paid from the plan assets during 2013, with a corresponding decrease of $2.8 million in the benefit obligation. As a result of the lump sum distribution, a settlement loss of $0.5 million, net of tax, was recorded in “Income from Discontinued Operations, net” in the Consolidated Statements of Income and Comprehensive Income as it was directly related to the sale of the Wood Products business. For additional information on the sale of the Wood Products business, see Note 3 — Discontinued Operations.

The following tables set forth the change in the projected benefit obligation and plan assets and reconcile the funded status and the amounts recognized in the Consolidated Balance Sheets for the pension and postretirement benefit plans for the two years ended December 31:



	Pension		Postretirement
	2014	2013	2014	2013
Change in Projected Benefit Obligation
Projected benefit obligation at beginning of year	$413,638	$454,470	$21,999	$27,582
Service cost	3,923	8,452	402	1,056
Interest cost	10,707	16,682	537	937
Settlement loss	—	137	—	—
Actuarial loss (gain)	43,093	(44,786)	2,250	(3,206)
Plan amendments	—	—	—	(3,372)
Employee contributions	—	—	484	980
Benefits paid	(11,288)	(21,317)	(888)	(1,978)
Transferred to Rayonier Advanced Materials	(372,718)	—	(23,558)	—
Projected benefit obligation at end of year	$87,355	$413,638	$1,226	$21,999



Change in Plan Assets
Fair value of plan assets at beginning of year	$341,905	$320,699	—	—
Actual return on plan assets	21,399	42,285	—	—
Employer contributions	1,103	1,699	404	998
Employee contributions	—	—	484	980
Benefits paid	(11,288)	(21,317)	(888)	(1,978)
Other expense	(607)	(1,461)	—	—
Transferred to Rayonier Advanced Materials	(296,966)	—	—	—
Fair value of plan assets at end of year	$55,546	$341,905	—	—



Funded Status at End of Year:
Net accrued benefit cost	$(31,809)	$(71,733)	$(1,226)	$(21,999)



Amounts Recognized in the Consolidated
Balance Sheets Consist of:
Noncurrent assets	—	$3,583	—	—
Current liabilities	(15)	(1,776)	(25)	(1,071)
Noncurrent liabilities	(31,794)	(73,540)	(1,201)	(20,928)
Net amount recognized	$(31,809)	$(71,733)	$(1,226)	$(21,999)

Net gains or losses, prior service costs or credits and plan amendment gains recognized in other comprehensive income for the three years ended December 31 are as follows:



	Pension			Postretirement
	2014	2013	2012	2014	2013	2012
Net gains (losses)	$37,559	$60,171	$(17,630)	$(2,250)	$3,206	$(2,021)
Prior service cost	—	—	—	—	—	—
Negative plan amendment	—	—	—	—	3,372	—

Net gains or losses and prior service costs or credits reclassified from other comprehensive income and recognized as a component of pension and postretirement expense for the three years ended December 31 are as follows:



	Pension			Postretirement
	2014	2013	2012	2014	2013	2012
Amortization of losses	$6,542	$20,914	$17,578	$288	$675	$582
Amortization of prior service cost	576	1,356	1,308	8	66	80
Amortization of negative plan amendment	—	—	—	(137)	(105)	(55)

Net losses and prior service costs or credits that have not yet been included in pension and postretirement expense for the two years ended December 31, which have been recognized as a component of AOCI are as follows:



	Pension		Postretirement
	2014	2013	2014	2013
Prior service cost	$(13)	$(5,707)	—	$(49)
Net losses	(30,965)	(110,728)	(90)	(8,057)
Negative plan amendment	—	—	—	3,574
Deferred income tax benefit	2,425	36,685	(22)	1,571
AOCI	$(28,553)	$(79,750)	$(112)	$(2,961)

For pension and postretirement plans with accumulated benefit obligations in excess of plan assets, the following table sets forth the projected and accumulated benefit obligations and the fair value of plan assets for the two years ended December 31:



	2014	2013
Projected benefit obligation	$87,355	$388,163
Accumulated benefit obligation	81,141	350,605
Fair value of plan assets	55,546	290,848

The following tables set forth the components of net pension and postretirement benefit cost that have been recognized during the three years ended December 31:



	Pension			Postretirement
	2014	2013	2012	2014	2013	2012
Components of Net Periodic Benefit Cost
Service cost	$3,923	$8,452	$8,407	$402	$1,056	$918
Interest cost	10,707	16,682	17,284	537	937	956
Expected return on plan assets	(15,258)	(25,302)	(25,477)	—	—	—
Amortization of prior service cost	576	1,296	1,308	8	66	80
Amortization of losses	6,542	20,097	17,578	288	675	582
Amortization of negative plan amendment	—	—	—	(137)	(105)	(55)
Curtailment expense	—	60	—	—	—	—
Settlement expense	—	817	—	—	—	—
Net periodic benefit cost (a)	$6,490	$22,102	$19,100	$1,098	$2,629	$2,481


(a)	Net periodic benefit cost for the years ended December 31, 2014, 2013 and 2012 included $4.0 million, $14.9 million, and $12.8 million, respectively, recorded in “Income from discontinued operations, net” on the Consolidated Statements of Income and Comprehensive Income.

The estimated pre-tax amounts that will be amortized from AOCI into net periodic benefit cost in 2015 are as follows:



	Pension	Postretirement
Amortization of loss	$3,420	—
Amortization of prior service cost	13	—
Total amortization of AOCI loss	$3,433	—

The following table sets forth the principal assumptions inherent in the determination of benefit obligations and net periodic benefit cost of the pension and postretirement benefit plans as of December 31:



	Pension						Postretirement
	2014		2013		2012		2014		2013		2012
Assumptions used to determine benefit obligations at December 31:
Discount rate	3.80	%	4.60	%	3.70	%	3.96	%	4.60	%	3.60	%
Rate of compensation increase	4.50	%	4.60	%	4.60	%	4.50	%	4.50	%	4.50	%
Assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate (pre-spin off)	4.60	%	3.70	%	4.20	%	4.60	%	3.60	%	4.10	%
Discount rate (post-spin off)	4.04	%	—		—		4.00	%	—		—
Expected long-term return on plan assets	8.50	%	8.50	%	8.50	%	—		—		—
Rate of compensation increase	4.50	%	4.60	%	4.50	%	4.50	%	4.50	%	4.50	%

The sensitivity of pension expense and projected benefit obligation to changes in economic assumptions is highlighted below:



	(unaudited)
	Impact on:
Change in Assumption	Pension Expense	Projected Benefit Obligation
0.5% decrease in discount rate	+ 0.4 million	+ 7.5 million
0.5% increase in discount rate	- 0.4 million	- 6.6 million
0.5% decrease in long-term return on assets	+ 0.1 million
0.5% increase in long-term return on assets	- 0.1 million

At December 31, 2014, the pension plan’s discount rate was 3.80 percent, which closely approximates interest rates on high quality, long-term obligations. Effective December 31, 2014, the expected return on plan assets remained at 8.5 percent, which is based on historical and expected long-term rates of return on broad equity and bond indices and consideration of the actual annualized rate of return. The Company, with the assistance of external consultants, utilizes this information in developing assumptions for returns, and risks and correlation of asset classes, which are then used to establish the asset allocation ranges.

The following table sets forth the assumed health care cost trend rates at December 31:



	Postretirement
	2014	2013
Health care cost trend rate assumed for next year (a)	N/A	7.00	%
Rate to which the cost trend rate is assumed to decline (ultimate trend rate) (a)	N/A	5.00	%
Year that the rate reaches the ultimate trend rate (a)	N/A	2017


(a)	The entire postretirement medical plan was contributed to Rayonier Advanced Materials as a result of the spin-off of the Performance Fibers business.

Assumed health care cost trend rates have a significant effect on the amounts reported for the postretirement benefit plans. The following table shows the effect of a one percentage point change in assumed health care cost trends as of December 31, 2013:



	1 Percent
Effect on:	Increase	Decrease
Total of service and interest cost components (a)	$253	$(208)
Accumulated postretirement benefit obligation (a)	1,389	(1,183)


(a)	The entire postretirement medical plan was contributed to Rayonier Advanced Materials as a result of the spin-off of the Performance Fibers business.

Investment of Plan Assets

The Company’s pension plans’ asset allocation (excluding short-term investments) at December 31, 2014 and 2013, and target allocation ranges by asset category are as follows:



	Percentage of Plan Assets				Target Allocation Range
Asset Category	2014		2013		Target Allocation Range
Domestic equity securities	42	%	42	%	35-45%
International equity securities	23	%	26	%	20-30%
Domestic fixed income securities	27	%	25	%	25-29%
International fixed income securities	4	%	4	%	3-7%
Real estate fund	4	%	3	%	2-4%
Total	100	%	100	%

The Company’s Pension and Savings Plan Committee and the Audit Committee of the Board of Directors oversee the pension plans’ investment program which is designed to maximize returns and provide sufficient liquidity to meet plan obligations while maintaining acceptable risk levels. The investment approach emphasizes diversification by allocating the plans’ assets among asset categories and selecting investment managers whose various investment methodologies will be minimally correlative with each other. Investments within the equity categories may include large capitalization, small capitalization and emerging market securities, while the international fixed income portfolio may include emerging markets debt. Pension assets did not include a direct investment in Rayonier common stock at December 31, 2014 or 2013.

Fair Value Measurements

The following table sets forth by level, within the fair value hierarchy (see Note 2 — Summary of Significant Accounting Policies for definition), the assets of the plans as of December 31, 2014 and 2013.



	Fair Value at December 31, 2014			Fair Value at December 31, 2013
Asset Category	Level 1	Level 2	Total	Level 1	Level 2	Total
Domestic equity securities	$4,557	$18,326	$22,883	$29,293	$110,401	$139,694
International equity securities	6,277	6,488	12,765	55,692	31,347	87,039
Domestic fixed income securities	—	14,643	14,643	—	85,222	85,222
International fixed income securities	2,428	—	2,428	15,134	—	15,134
Real estate fund	1,887	—	1,887	9,678	—	9,678
Short-term investments	—	940	940	879	4,259	5,138
Total	$15,149	$40,397	$55,546	$110,676	$231,229	$341,905

The valuation methodology used for measuring the fair value of these asset categories was as follows:

Level 1 — Net asset value in an observable market.

Level 2 — Assets classified as level two are held in collective trust funds. The net asset value of a collective trust is calculated by determining the fair value of the fund’s underlying assets, deducting its liabilities, and dividing by the units outstanding as of the valuation date. These funds are not publicly traded; however, the unit price calculation is based on observable market inputs of the funds’ underlying assets.

There have been no changes in the methodology used during the years ended December 31, 2014 and 2013.

Cash Flows

Expected benefit payments for the next 10 years are as follows:



	Pension Benefits	Postretirement Benefits
2015	$2,729	$25
2016	2,866	27
2017	3,041	28
2018	3,231	30
2019	3,450	33
2020 - 2024	20,807	201

The Company has no mandatory pension contribution requirements in 2015, but may make discretionary contributions.

Defined Contribution Plans

The Company provides defined contribution plans to all of its hourly and salaried employees. Company contributions charged to expense for these plans were $1.6 million, $4.4 million and $2.7 million for the years ended December 31, 2014, 2013 and 2012, respectively. Rayonier Hourly and Salaried Defined Contribution Plans include Rayonier common stock with a fair market value of $16.3 million and $73.2 million at December 31, 2014 and 2013, respectively.

As discussed above, all defined benefit pension plans are currently closed to new employees. Employees not eligible for the pension plans are immediately eligible to participate in the Company’s 401(k) plan and receive an enhanced contribution. Company contributions related to this plan enhancement for the years ended December 31, 2014, 2013 and 2012 were $0.5 million, $1.1 million and $1.0 million, respectively.